Q2 2024 PJT Partners Inc Earnings Call

Operator: Hey Senpai, your program is about to begin. If you need audio assistance during your call today, please press star zero. Good day and welcome to the PJT Partners Second Quarter 2024 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Sharon Pearson, Head of Investor Relations. Please go ahead, ma'am.

Operator: Good day, and a welcome to the PJT Partners second quarter 2024 earnings call. Today's conference is being recorded.

Sharon Pearson: Good day and welcome to the PJT Partners 2nd Quarter 2024 Earnings Call. Today's conference is being recorded. At this time I would like to turn the conference over to Sharon Pearson, Head of Investor Relations. Please go ahead ma'am.

Sharon Pearson: At this time, I would like to turn the conference over to Sharon Pearson, head of Investor Relations. Please go ahead, ma'am.

Sharon Pearson: Thank you very much. Good morning, and welcome to the PJT Partners second quarter 2024 earnings conference call. I'm Sharon Pearson, Head of Investor Relations at PJT Partners, and joining me today is Paul Taubman, our Chairman and Chief Executive Officer, and Helen Meates, our Chief Financial Officer. Before I turn the call over to Paul, I want to point out that during the course of this conference call, we may make a number of forward-looking statements.

Sharon Pearson: Thank you very much.

Sharon Pearson: Good morning and welcome to the PJT Partners second quarter 2024 earnings conference call. I'm Sharon Pearson, Head of Investor Relations at PJT Partners. Joining me today is Paul Taubman, our chairman and chief executive officer and Helen Meates, a chief financial officer.

Speaker Change: Thank you very much. Good morning and welcome to the PJT Partners.

Speaker Change: Second Quarter 2024 Earnings Conference Call.

Sharon Pearson: I'm Sharon Pearson, Head of Investor Relations at PJT Partners, and joining me today is Paul Taubman, our Chairman and Chief Executive Officer, and Helen Meates, our Chief Financial Officer.

Sharon Pearson: Before I turn the call over to Paul, I want to point out that during the course of this conference call, we may make a number of forward-looking statements. These forward-looking statements are subject to various risks and uncertainties, and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. We believe that these factors that described in the risk factors section contained in PJT Partners 2023 Form 10-K, which is available on our website at PJT Partners.com.

Sharon Pearson: These forward-looking statements are subject to various risks and uncertainties, and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. We believe that these factors are described in the risk factors section contained in PJT Partners' 2023 Form 10-K, which is available on our website at pjtpartners.com. I want to remind you that the company assumes no duty to update any forward-looking statements and that the presentation we make today contains non-GAAP financial measures which we believe are meaningful in evaluating the company's performance.

Speaker Change: Before I turn the call over to Paul, I want to point out that during the course of this conference call, we may make a number of forward-looking statements.

Speaker Change: These forward-looking statements are subject to various risks and uncertainties, and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements.

Paul: We believe that these factors are described in the risk factors section contained in PJT Partners 2023 Form 10-K , which is available on our website at pjtpartners.com.

Sharon Pearson: I want to remind you that the company assumes no duty to update any forward-looking statements and that the presentation we make today contains non-GAAP financial measures which we believe are meaningful in evaluating the company's performance. For detailed disclosures on these non-GAAP metrics and the GAAP reconciliation, you should refer to the financial data contained within the press release we issued this morning, also available on our website.

Paul: I want to remind you that the company assumes no duty to update any forward-looking statements and that the presentation we make today contains non-GAAP financial measures which we believe are meaningful in evaluating the company's performance.

Sharon Pearson: For detailed disclosures on these non-GAAP metrics and their GAAP reconciliations, you should refer to the financial data contained within the press release we issued this morning, also available on our website. And with that, I'll turn the call over to Paul.

Paul: For detailed disclosures on these non-GAAP metrics and their GAAP reconciliations,

Paul: You should refer to the financial data contained within the press release we issued this morning, also available on our website. And with that, I'll turn the call over to Paul. Thank you, Sharon. Good morning, and thank you all for joining today's earnings call.

Paul Taubman: And with that, I'll turn the call over to Paul. Thank you, Sharon. Good morning, and thank you all for joining today's earnings call. We delivered record performance in the second quarter. Our Q2 revenues were the highest in the firm's history and helped us to deliver adjusted pre-tax income of 19% year-over-year and adjusted EPS of 20% from year-ago levels. Your-to-date performance also reflected strength across all of our businesses with record revenues of 690 million, of 26% year-over-year. Adjusted pre-tax income of 41% year-over-year and adjusted EPS of 43% from year-ago levels.

Paul Jeffrey Taubman: Thank you, Sharon. Good morning, and thank you all for joining us for today's earnings call. We delivered record performance in the second quarter. Our Q2 revenues were the highest in the firm's history and helped us to deliver adjusted pre-tax income of 19% year over year and Adjusted EPS of 20% from a year-ago level. Year-to-date performance also reflected strength across all of our businesses, with record revenues of $690 million, 26% year over year, adjusted pre-tax income of 41% year-over-year, and Adjusted EPS Up 43% from the year-ago level.

Paul: We delivered record performance in the second quarter.

Paul: Our Q2 revenues were the highest in the firm's history.

Paul: and helped us to deliver adjusted pre-tax income of 19% year-over-year and adjusted EPS of 20%.

Paul: from Year Ago levels.

Paul: Year-to-date performance also reflected strength across all of our businesses with record revenues of $690 million of 26% year-over-year, adjusted pre-tax income of 41% year-over-year,

Paul: and adjusted EPS up 43% from year-ago levels.

Paul Taubman: While we're pleased with our mid-year results, our focus continues to be on investing to build the strongest firm for the long term. We continue to invest in talent at all levels. We continue to expand our industry expertise, our product capabilities, and our global reach. And we continue to work in close collaboration within businesses and across businesses to deliver the best outcomes for clients. The results from this consistent and disciplined investment is now beginning to show through and our financials.

Paul Jeffrey Taubman: While we're pleased with our mid-year results, our focus continues to be on investing to build the strongest firm for the long term. We continue to invest in talent at all levels. We continue to expand our industry expertise, our product capabilities, and our global reach, and we continue to work in close collaboration within businesses and across businesses to deliver the best outcomes for clients. The results from this consistent and disciplined investment are now beginning to show through in our finances. After Helen takes you through our results, I will review our business performance and outlook in greater detail. Helen said:

Paul: While we're pleased with our mid-year results, our focus continues to be on investing to build the strongest firm for the long term.

Paul: We continue to invest in talent at all levels.

Paul: We continue to expand our industry expertise, our product capabilities, and our global reach.

Paul: And, we continue to work in close collaboration within businesses and across businesses to deliver the best outcomes for clients.

Paul: The results from this consistent and disciplined investment is now beginning to show through in our financials.

Paul Taubman: After Helen takes you through our results, I will review our business performance and outlook in greater detail.

Paul: After Helen takes you through our results, I will review our business performance and outlook in greater detail.

Helen Therese Meates: Helen? Thank you, Paul. Good morning. Total revenues for the second quarter were $360 million, a record quarter, up 4% year-over-year. PJT Park Hill revenues were meaningfully higher compared to a year ago. For the six months, revenues in all of the businesses were up meaningfully compared to a year ago.

Helen Meates: Helen. Thank you, Paul. Good morning.

Helen Meates: Beginning with total revenues for the second quarter with £360 million, a record quarter at 4% year-over-year. PJT Park Hill revenues were meaningfully higher compared to year-old levels. Strategic Advisory revenues were up modestly year-over-year, while restructuring revenues were similar to first quarter revenues but below the prior year's record revenues.

Helen: Helen. Thank you, Paul. Good morning. Beginning with revenues. Total revenues for the second quarter were $360 million, a record quarter, up 4% year-over-year.

Helen: PJT Park Hill revenues were meaningfully higher compared to a year ago levels.

Helen: Strategic advisory revenues were up modestly year over year, while restructuring revenues were similar to first quarter revenues but below the prior year's record revenues.

Helen Meates: For the six months and a June 30 total revenues were 690 million, a record-first half up 26% year-over-year. For the six months, revenues and all of the businesses were up meaningfully compared to year-go-levels.

Helen: For the six months ended June 30, total revenues were $690 million, a record first half, up 26% year-over-year.

Helen: For the six months, revenues in all of the businesses were up meaningfully compared to a year ago levels.

Helen Meates: Turning to expenses consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments, which are more fully described in our 8-K. First compensation expense: we accrued compensation expense at 69.5% of revenues for the first half of the year. This ratio represents our current expectation for the full year 2024. Turning to adjusted non-compensation expense, total adjusted non-compensation expense was 44 million for the second quarter, flat year-over-year, and 89 million for the first half, up 8.7 million or 11% year-over-year. As a percentage of revenues, 12.3% in the second quarter and 13% in the first half. The main drivers of the expense increase for the first half of the year were higher occupancy costs, higher travel and related expenses, as well as investments in communications and information services.

Helen Therese Meates: Turning to expenses, consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments, which are more fully described in our 8K. First, compensation expense. We accrued compensation expense at 69.5% of revenues for the first half of the year. This ratio represents our current expectation for the full year 2024. Turning to Adjusted Non-Compensation Expense. Total Adjusted Non-Compensation Expense was $44 million for the second quarter, flat year-over-year, and $89 million for the first half, up $8.7 million, or 11% year-over-year. The main drivers of the expense increase for the first half of the year were higher occupancy costs, higher travel and related expenses, as well as investments in communications and information services.

Speaker Change: Turning to expenses consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments, which are more fully described in our 8K.

Speaker Change: First, compensation expense. We accrued compensation expense at 69.5% of revenues for the first half of the year. This ratio represents our current expectation for the full year 2024.

Speaker Change: Turning to Adjustive Non-Compensation Extent.

Speaker Change: Total adjusted non-compensation expense was $44 million for the second quarter, flat year-over-year, and $89 million for the first half, up $8.7 million, or 11% year-over-year.

Speaker Change: As a percentage of revenues, 12.3% in the second quarter and 13% in the first half.

Speaker Change: The main drivers of the expense increase for the first half of the year were higher occupancy costs,

Speaker Change: Higher travel and related expenses, as well as investments in communications and information services.

Helen Meates: Overall, for the full year, we expect that our non-compets expense will grow in the low double-digit percentage year-over-year, similar to the growth rate we experienced in 2023 and consistent with our prior guidance.

Helen Therese Meates: Overall, for the full year, we expect that our non-comp expense will grow by a low double-digit percentage year over year, similar to the growth rate we experienced in 2023 and consistent with our prior guidance. Provision for taxes. As with prior quarters, we presented our results as if all partnership units had been converted to shares and that all of our income was taxed at a corporate tax rate. Our effective tax rate for the first half of 2024 was 22%, and we expect this to be our effective tax rate for the full year.

Speaker Change: Overall, for the full year, we expect that our non-comp expense will grow in the low double-digit percentage year-over-year, similar to the growth rate we experienced in 2023 and consistent with our prior guidance.

Helen Meates: Turning to adjusted pre-tax income, we reported adjusted pre-tax income of 66 million for the second quarter and 121 million for the first six months. Our adjusted pre-tax margin of 18.2% for the second quarter compared with 16% for the same period last year, and 17.5% for the first six months compared with 15.7% for the same period last year.

Speaker Change: Turning to adjusted pre-tax income, we reported adjusted pre-tax income of $66 million for the second quarter and $121 million for the first six months.

Speaker Change: Our adjusted pre-tax margin of 18.2% for the second quarter compared with 16% for the same period last year and 17.5% for the first six months compared with 15.7% for the same period last year.

Helen Meates: The provision for taxes, as with prior quarters, we presented our results as if all partnership units had been converted to shares and that all of our income was taxed at a corporate tax rate. Our effective tax rate for the first half of 2024 was 22%, and we expect this to be our effective tax rate for the full year. Earnings per share are adjusted if converted earnings were a dollar 19 per share for the second quarter, up 20%, and two dollars 17 per share for the first six months, up 43% versus the same period last year.

Speaker Change: The provision for taxes, as with prior quarters, we presented our results as if all partnership units had been converted to shares and that all of our income was taxed at a corporate tax rate.

Speaker Change: Our effective tax rate for the first half of 2024 was 22%, and we expect this to be our effective tax rate for the full year.

Helen Therese Meates: Earnings per share, our Adjusted If Converted Earnings were $1.19 per share for the second quarter, up 20%, and $2.17 per share for the first six months, up 43% versus the same period last year. On the share count for the quarter, our weighted average share count was 43 million shares. During the second quarter, we repurchased the equivalent of approximately 710,000 shares, primarily through open market repurchases. Our repurchases in the first six months total approximately 2.2 million shares, with record open market repurchases of 1.7 million.

Speaker Change: Earnings per share are adjusted if converted earnings were $1.19 per share for the second quarter, up 20%.

Speaker Change: and $2.17 per share for the first six months up 43% versus the same period last year.

Helen Meates: On the share count for the quarter, our weighted average share count was 43 million shares. During the second quarter, we repurchased the equivalent of approximately 710,000 shares, primarily through open market repurchases. Our repurchases in the six months total approximately 2.2 million shares, with record open market repurchases of 1.7 million.

Speaker Change: On the share count for the quarter, our weighted average share count was 43 million shares. During the second quarter, we repurchased the equivalent of approximately 710,000 shares, primarily through open market repurchases.

Speaker Change: Our repurchases in the first 6 months total approximately 2.2 million shares with record open market repurchases of 1.7 million.

Helen Meates: On the balance sheet, we entered the quarter with a record 351 million in cash, cash equivalence and short term investments and 438 million in network and capital, and we have no fun to do that then. We have entered into a new 100 million dollar revolving credit agreement with Bank of America as the administration agent and JPMorgan Chase and MUFG collectively as lenders. The credit agreement has an initial two-year term and replaces our existing facility with First Republic Bank, now part of JPMorgan, and that was due to expire October this year.

Helen Therese Meates: On the balance sheet, we ended the quarter with a record $351 million in cash, cash equivalents, and short-term investments and $438 million in net working capital, and we have no funded debt outstanding. We have entered into a new $100 million revolving credit agreement with Bank of America as the administration agent and J.P. Morgan Chase and MUFG collectively as lenders. The credit agreement has an initial two-year term and replaces our existing facility with First Republic Bank, now part of J.P. Morgan.

Speaker Change: On the balance sheet, we ended the quarter with a record $351 million in cash, cash equivalents and short-term investments, and $438 million in networking capital, and we have no funded debt outstanding.

Speaker Change: We have entered into a new $100 million revolving credit agreement with Bank of America as the administration agent and JPMorgan Chase and MUFG collectively as lenders.

Speaker Change: The credit agreement has an initial two-year term and replaces our existing facility with First Republic Bank, now part of J.P. Morgan. And that was due to expire in October this year.

Helen Therese Meates: And that was due to expire in October this year. Finally, the board has approved a dividend of $0.25 per share. The dividend will be paid on September 18, 2024, to Class A common shareholders of record as of September 4.

Helen Meates: Finally, the board has approved a dividend of 25 cents to share. The dividend will be paid on September 18th, 2024, to class A common shareholders of record as of September 4th on now to inductable.

Speaker Change: Finally, the Board has approved a dividend of $0.25 per share. The dividend will be paid on September 18, 2024 to Class A Common Shareholders of Record as of September 4. I'll now turn back to Paul.

Helen Therese Meates: I'll now turn back to Paul.

Paul Taubman: Thank you, Helen.

Paul Jeffrey Taubman: beginning with PJT Partil. For the three and six month periods, revenues in our PJT Park Hill business rebounded sharply from last year's challenging performance, with Private Equity and Private Capital Solutions delivering the greatest gains. While the fundraising environment remains subdued, it has improved meaningfully from a year ago. We expect PJT Park Hills 2024 results to be up significantly year-over-year, although full-year 2024 revenues will lag 2022's record-setting level.

Paul Taubman: Beginning with PJT Partill. For the three and six month periods, revenues in our PJT Partill business rebounded sharply from last year's challenging performance, with private equity and private capital solutions delivering the greatest gains. While the fundraising environment remains to do, it has improved meaningfully from a year ago. We expect PJT Partill's 2024 results to be up significantly year-over-year, although full-year 2024 revenues will lag 2022's record-setting levels.

Paul: Thank you, Helen.

Paul: Beginning with PJT Part 2.

Paul: For the three- and six-month periods, revenues in our PJT Park Hill business rebounded sharply from last year's challenging performance.

Paul: with Private Equity and Private Capital Solutions delivering the greatest gains.

Speaker Change: While the fundraising environment remains subdued, it has improved meaningfully from a year ago.

Speaker Change: We expect PJT Park Hills 2024 results.

Speaker Change: To be up significantly year-over-year, although full-year 2024 revenues will lag 2022's record-setting levels.

Paul Taubman: Turning to restructuring. We are benefiting from a multi-year cycle of elevated restructuring activity as corporates and sponsors across industries continue to work their way through the impact of higher interest rates, challenged business models, technological disruption, and changing consumer preferences. Much of the growth in our restructuring business is the result of clients increasingly turning to PJT for advice on proactive liability management to address balance sheet issues. Our restructuring performance reflects the continued level of elevated activity, this continued level of elevated activity, and our leading market share. The first half restructuring revenues increased relative to last year's first half performance.

Paul Jeffrey Taubman: Turning to Restructuring. We are benefiting from a multi-year cycle of elevated restructuring activity as corporates and sponsors across industries continue to work their way through the impact of higher interest rates, challenged business models, technological disruption, and changing consumer preferences.

Speaker Change: Turning to Restructuring.

Speaker Change: We are benefiting from a multi-year cycle of elevated restructuring activity as corporates and sponsors across industries continue to work their way

Speaker Change: through the impact of higher interest rates.

Speaker Change: Challenged Business Models, Technological Disruption, and Changing Consumer Preferences.

Paul Jeffrey Taubman: Much of the growth in our restructuring business is the result of clients increasingly turning to PJT for advice on proactive liability management to address balance sheet issues. Our restructuring performance reflects the continued level of elevated activity, this continued level of elevated activity, and our leading market share. First half restructuring revenues increased relative to last year's first half performance, and we now expect full year 2024 restructuring revenues to closely track 2023's record results. Turning to Strategic Advisory.

Speaker Change: Much of the growth in our restructuring business is the result of clients increasingly turning to PJT for advice on proactive liability management.

Speaker Change: to address balance sheet issues.

Speaker Change: Our restructuring performance reflects the continued level of elevated activity, this continued level of elevated activity, and our leading market share.

Speaker Change: First half restructuring revenues increased relative to last year's first half performance.

Paul Taubman: And we now expect full-year 2024 restructuring revenues to closely track 2023's record results.

Speaker Change: And we now expect full year 2024 restructuring revenues.

Speaker Change: to closely track 2023's record results.

Paul Taubman: Turning to strategic advisory. At the beginning of the year, we foresaw a slow but steady build in global M&A activity as markets stabilized and historical relationships between M&A activity and broader market benchmarks began to re-emerge. The year is playing out pretty much as we expected, with global M&A run rate activity tracking modestly ahead of 2023 levels. We expect the global M&A recovery to continue with the potential for a step function increase, post the US elections, if, as seems increasingly likely, the Fed initiates rate cuts and other central banks continue their rate lowering policies. Our strategic advisory revenues for both the three and six month period increased relative to year-a-go levels, as our announced pending close pipeline and our mandate count grew steadily in the first half of the year.

Paul Jeffrey Taubman: At the beginning of the year, we foresaw a slow but steady build in global M&A activity as markets stabilize, and historical relationships between M&A activity and broader market benchmarks began to reemerge. The year is playing out pretty much as we expected, with global M&A run rate activity tracking modestly ahead of 2023 levels. We expect the global M&A recovery to continue, with the potential for a step function increase. If, as seems increasingly likely, the Fed initiates rate cuts, and other central banks continue their rate-lowering policies

Speaker Change: Turning to Strategic Advisory.

Speaker Change: At the beginning of the year, we foresaw a slow but steady build in global M&A activity as markets stabilized and historical relationships between M&A activity and broader market benchmarks began to reemerge.

Speaker Change: The year is playing out pretty much as we expected, with global M&A run rate activity tracking modestly ahead of 2023 levels.

Speaker Change: We expect the global M&A recovery to continue.

Speaker Change: with the potential for a step function increase.

Speaker Change: Post the U.S. elections, if, as seems increasingly likely, the Fed initiates rate cuts and other central banks continue their rate-lowering policies.

Paul Jeffrey Taubman: Our strategic advisory revenues for both the three- and six-month periods increased relative to year-ago levels. Our mandate count is now the highest in our firm's history. We are seeing an increase in attractive recruiting opportunities for our strategic advisory business, due in large part to our firm's broadening track record of success. We continue to recruit highly talented professionals to our strategic advisory business. And these additions to our talent base have significantly enhanced our ability to capitalize on a higher-velocity M&A environment.

Speaker Change: Our strategic advisory revenues for both the three- and six-month periods

Speaker Change: increased relative to year-ago levels.

Speaker Change: As our announced pending close pipeline and our mandate count grew steadily in the first half of the year.

Paul Taubman: Our mandate count is now the highest in our firm's history. Even in today's more active M&A environment, we are seeing an increase in attractive recruiting opportunities for our strategic advisory business, due in large part to our firm's broadening track record of success. We continue to recruit highly talented professionals to our strategic advisory business, and these additions to our talent base have significantly enhanced our ability to capitalize on a higher velocity M&A environment.

Speaker Change: Our mandate count is now the highest in our firm's history.

Speaker Change: Even in today's more active M&A environment, we are seeing an increase in attractive recruiting opportunities for our strategic advisory business.

Speaker Change: due in large part to our firm's broadening track record of success.

Speaker Change: We continue to recruit highly talented professionals to our strategic advisory business.

Speaker Change: And these additions to our talent base have significantly enhanced

Speaker Change: Our Ability to Capitalize on a Higher Velocity M&A Environment.

Paul Taubman: In closing, we continue to measure our performance in years, not half-years. And even though our full-year growth is unlikely to approach 26%, we will undoubtedly deliver a third successive year of revenue growth and a second consecutive year of record revenues, which is all the more impressive given the relatively muted macro environment in which we have been operating. We have high expectations for what our ever stronger firm can deliver in the years to come. And as before, we remain confident in our near, intermediate, and long-term growth prospects.

Paul Jeffrey Taubman: In closing... We continue to measure our performance in years, not half, and a second consecutive year of record revenue, which is all the more impressive given the relatively muted macro environment in which we have been operating. We have high expectations for what our increasingly stronger firm can deliver in the years to come. And as before, we remain confident in our near, intermediate, and long-term growth processes. And with that, We will now take your questions.

Speaker Change: In closing.

Speaker Change: We continue to measure our performance in years, not half years.

Speaker Change: And even though our full-year growth is unlikely to approach 26%,

Speaker Change: We will undoubtedly deliver a third successive year of revenue growth and a second consecutive year of record revenues.

Speaker Change: which is all the more impressive given the relatively muted macro environment in which we have been operating.

Speaker Change: We have high expectations for what our ever-stronger firm can deliver in the years to come.

Speaker Change: And as before, we remain confident in our near, intermediate, and long-term growth prospects.

Operator: And with that, we will now take your questions.

Speaker Change: And with that, we will now take your questions.

Operator: Ladies and gentlemen, at this time, the floor is now open for your questions. To ask a question, please press star one on your telephone keypad. To get out of the queue, please press star two.

Operator: Ladies and gentlemen, at this time, the floor is now open to your questions. To ask a question, please press star 1 on your telephone keypad. To get out of the queue, please press star 2. We will take our first question from Devin Ryan with Citizens J&P. Please go ahead.

Speaker Change: Ladies and gentlemen, at this time the floor is now open for your questions. To ask a question, please press star 1 on your telephone keypad. To get out of the queue, please press star 2. We'll take our first question from Devin Ryan with Citizens J&P. Please go ahead.

Devin Ryan: And we'll take our first question from Dev and Ryan with Citizens' JMP. Please go ahead. Good morning, Paul and Helen. How are you? Very well. Good morning, Dev. Appreciate all the Outlook commentary, Paul, and particularly just on the broader M&A market and kind of what you're seeing and expecting. If you look at PJT specifically, I heard the comment about a record M&A count and strategic advisory, which I believe would imply an improvement from last quarter. I think last quarter you mentioned record pre-announced pipeline, so I'm not sure if there's any distinction there, but just curious how much trended, and then just more broadly, whether you're seeing any change in tone around the speed to progress deals.

Devin Patrick Ryan: Uh, terrific. Good morning, Paul.

Paul Jeffrey Taubman: Very well. Good morning.

Devin Patrick Ryan: Terrific, good morning Paul and Helen, how are you?

Devin Patrick Ryan: Appreciate all the outlook commentary, Paul, and particularly just on the broader M&A market and kind of what you're seeing and expecting. If you're looking at PJT specifically, I heard the comment about a record mandate count and strategic advisory, which I believe would imply an improvement from last quarter. I think last quarter you mentioned record pre-announced pipelines, so I'm not sure if there's any distinction there, but just curious how that's trended, and then, more broadly, whether you're seeing any change in tone around the speed to progress deals. I appreciate there could be kind of an inflection post-election, but are you actually seeing an acceleration here even in recent months, maybe post the prior quarter? Thank you.

Paul: Very well. Good morning, Devin.

Devin Patrick Ryan: Appreciate all the Outlook commentary, Paul, and particularly just on the broader M&A market and kind of what you're seeing and expecting.

Devin Patrick Ryan: If you're looking at PJT specifically, I heard the comment about a record mandate count and strategic advisory, which I believe would imply an improvement from last quarter. I think last quarter you mentioned record...

Speaker Change: pre-announced pipeline, so I'm not sure if there's any distinction there, but just curious.

Speaker Change: and I think we've got a couple of questions to go through. One is, how much trend is it, and just more broadly, whether you're seeing any change in tone around the speed to progress deals? I appreciate there could be kind of an inflection post-election, but are you actually seeing...

Paul Taubman: I appreciate there could be an inflection post-election, but are you actually seeing an acceleration here even in recent months maybe post the prior quarter? Thank you.

Speaker Change: and Acceleration here even in recent months, maybe post the prior quarter. Thank you.

Paul Taubman: Well, I mean, everyone, you know, it's a Rorschach test. Everyone probably looks at every situation a little bit differently. I continue to think that deals are still hard to bring to the goal line and that there has always been, in this downturn, what has made this downturn so different than prior periods of inactivity is the desire to transact remains very robust. and there is a clear desire to investigate transactions, to diligence transactions, to try and be creative in bringing them to fruition, but it has just been more difficult, and there have been different issues along the way.

Paul Jeffrey Taubman: Well, I mean, everyone, you know, it's a Rorschach test, everyone probably looks at every situation a little bit differently. I continue to think that deals are still hard to bring to the goal line, and that there has always been in this downturn. What has made this downturn so different from prior periods of inactivity is the desire to transact remains very robust. And there is a clear desire to investigate transactions and diligence transactions to try and be creative in bringing them to fruition, but it has just been more difficult, and there have been different issues along the way.

Speaker Change: Well, I mean, everyone, you know, it's a Rorschach test. Everyone probably looks at every situation a little bit differently. I continue to think.

Speaker Change: that deals are still hard to bring to the goal line.

Speaker Change: and that there has always been, in this downturn, what has made this downturn...

Speaker Change: So different than prior periods of inactivity is the desire to transact remains very robust.

Speaker Change: And there is a clear desire to investigate transactions, to diligence transactions, to try and be creative in bringing them to fruition, but it has just been more difficult, and there have been different issues along the way.

Paul Taubman: At one point in this recovery, it was more about access to financing. I think financing is far more plentiful today. I think there continues to be a bit asked on valuations, although I believe that has narrowed. There continues to be the soul-searching issue of do you want to subject your company and the target company to an extended period of regulatory review, and who bears the risk of degradation and performance between signing and closing. That one I think continues; the others have probably gotten a bit better, but we're not at a place where it's easy to get deals done, and those deals that have been announced still are set up particularly larger transactions and consolidating transactions.

Paul Jeffrey Taubman: At one point in this recovery, it was more about access to financing. I think financing is far more plentiful today. I think there continues to be a bid-ask on valuations, although I believe that has narrowed. There continues to be the soul-searching issue of do you want to subject your company and the target company to an extended period of regulatory review, and who bears the risk of degradation in performance between signing and closing? That one, I think, will continue.

Speaker Change: At one point in this recovery, it was more about access to financing. I think financing is far more plentiful today. I think there continues to be a bid-ask on valuations, although I believe that has narrowed. There continues to be the...

Speaker Change: The soul-searching issue of do you want to subject your company and the target company to an extended period of regulatory review and who bears the risk of degradation and performance between signing and closing. That one, I think, continues.

Paul Jeffrey Taubman: The others have probably gotten a bit better, but we're not at a place where it's easy to get deals done, and those deals that have been announced are still being set up, particularly larger transactions and consolidation transactions. The regulatory review process remains quite long and uncertain. But I definitely see a healing in the marketplace. I've always had the belief that while we've never had three down years in a row, we have had two.

Speaker Change: The others have probably gotten a bit better, but we're not at a place where it's easy to get deals done, and those deals that have been announced still are set up, particularly larger transactions.

Paul Taubman: The regulatory review process remains quite long and uncertain, but I definitely see a healing in the marketplace. I've always had the belief that, while we've never had three down years in a row, we had two. This was going to be an up year. I think people were driving past their headlights a little bit in the sense that the first year of a rebound tends to be reasonably modest, and you've seen the year-to-date activity levels. They were tracking in the 30s, up 30% year-over-year. That's continued to come down. We focus much more on just what the annualized run rate is, and it's up single digits.

Speaker Change: and consolidating transactions, the regulatory review process remains quite long and

Speaker Change: and Uncertain. But I definitely see a healing in the marketplace. I've always had the belief that while we've never had three down years in a row, we had two. This was going to be an up year.

Paul Jeffrey Taubman: This was going to be an up year. I think people were driving past their headlights a little bit in the sense that the first year of a rebound tends to be reasonably modest. And you've seen the year-to-date activity levels. They were tracking in the 30s, up 30% year over year. That's continued to come down, and we focus much more on just what the annualized run rate is. And it's up; it's up single digits.

Speaker Change: I think people were driving past their headlights a little bit in the sense that the first year of a rebound tends to be reasonably modest.

Speaker Change: And you've seen the year-to-date activity levels. They were tracking in the 30s, up 30% year-over-year. That's continued to come down. We focus much more on just what the annualized run rate is.

Devin Ryan: And even if we end the year stronger, it's still going to be a reasonably pedestrian first year of a recovery. But we see more and more of the elements building, and we're very focused on 25 and beyond. Got it. Okay. That's great color, Paul. Thanks.

Speaker Change: And it's up single digits, and even if we end the year stronger, it's still going to be a reasonably pedestrian first year of a recovery, but we see more and more of the elements building, and we're very focused on 25 and beyond.

Paul Jeffrey Taubman: And even if we end the year stronger, it's still going to be a reasonably pedestrian first year of recovery. But we see more and more of the elements building, and we're very focused on 25 and beyond.

Devin Patrick Ryan: Got it. Okay, that's a great color, Paul. Thanks. And then I'll just ask another one on the advisory board. But, you know, we're structuring business and zooming out a little bit to appreciate some of the more near-term color and expectation for 2024. And, obviously, you're kind of operating at a record level here. Do you see any potential catalysts that could drive maybe even a further acceleration in activity outside of kind of an economic stress period?

Devin Ryan: And then I'll just ask another one on the advisory, but you know, restructuring business and using out a little bit to appreciate some of the more near-term color and expectation for 2024, and obviously you're kind of operating at a record level here. Did you see any potential catalyst that could drive maybe even a further acceleration in activity outside of kind of an economic stress period? Like, is there anything that you think could actually drive an acceleration from here? And how should we think about the backdrop for restructuring in the kind of the next couple of years in your mind relative to what does sound like potentially an inflecting higher M&A market, clearly historically those two don't go together.

Speaker Change: Got it. Okay, that's great. Color call. Thanks. And then I'll just ask another one on the advisory. But, you know, restructuring business and

Speaker Change: Zooming out a little bit to appreciate some of the more near-term color and expectation for 2024 and obviously You're kind of operating at a record level here. Did you see any potential catalysts that could drive

Devin Patrick Ryan: Like, is there anything that you think could actually drive an acceleration from here? And how should we think about the backdrop for restructuring in kind of the next couple of years in your mind, relative to what does sound like potentially an inflecting higher M&A market? You know, clearly, historically, those two don't go together, but I would love to just get an update on kind of a more of an intermediate-term view of how these businesses could relate together here over the next couple of years.

Speaker Change: [inaudible]

Speaker Change: the backdrop for restructuring in kind of the next couple of years in your mind relative to what does sound like.

Speaker Change: potentially an inflecting higher M&A market. Clearly, historically those two don't go together, but love to just get an update on kind of more of an intermediate term view of how these businesses could relate together here over the next couple of years.

Paul Taubman: But we'll just get an update on kind of more of an intermediate term view of how these businesses could relate together here in the next couple of years. Well, look, I think this sets up potentially where they can both coexist. And one of the reasons for that, and I've talked about this repeatedly, is in a world of technological innovation and disruption, not everyone is a winner. and the issue is not whether it's the macroeconomic conditions necessarily that cause a lot of companies to need to restructure their balance sheets, but whether or not their business models have been severely disrupted.

Paul Jeffrey Taubman: Well, look, I think this potentially sets up a situation where they can both co-exist. And one of the reasons for that, and I've talked about this repeatedly, is that in a world of technological innovation and disruption, not everyone is a winner. And the issue is not necessarily whether it's the macroeconomic conditions necessarily that caused a lot of companies to need to restructure their balance sheets but whether or not their business models have been severely disrupted. So when I just look out with a crystal ball, my crystal ball is equally cloudy as yours.

Speaker Change: well look I I think this

Speaker Change: sets up potentially where they can both co-exist.

Speaker Change: And one of the reasons for that, and I've talked about this repeatedly, is in a world of technological innovation and disruption, not everyone is a winner.

Speaker Change: And the issue is not whether it's the macroeconomic conditions necessarily that caused a lot of companies to need to restructure their balance sheets, but whether or not their business models have been severely disrupted.

Paul Taubman: So when I just look out with a crystal ball, my crystal ball is equally cloudy; it's far from perfect, but I look at a world where there's tremendous disruption, innovation, which is creating more disruption. Whether it's generative AI, whether it's electrification, whether it's digitization, the world is changing, and that means that not everyone is going to be a winner. And regardless of the macro environment, if you're going to have industries that are going to be severely disrupted, that's going to pressure balance sheets, and lower interest rates are not going to bail out those companies. So there are industries that will be right for liability management; that is one issue.

Speaker Change: So when I just look out with a crystal ball, my crystal ball is equally cloudy, it's far from perfect, but I look at a world where there's tremendous disruption, innovation,

Paul Jeffrey Taubman: It's far from perfect, but I look at a world where there is tremendous disruption and innovation, which is creating more disruption. And whether it's generative AI, whether it's electrification, whether it's digitization, the world is changing. And that means that not everyone is going to be a winner, regardless of the macro environment. If you're going to have industries that are going to be severely disrupted, that's going to pressure balance sheets, and lower interest rates are not going to bail out those companies, so there are industries that will be ripe for liability management.

Speaker Change: which is creating more disruption and whether it's generative AI, whether it's electrification, whether it's digitization, the world is changing.

Speaker Change: And that means that not everyone is going to be a winner.

Speaker Change: And regardless of macro environment,

Speaker Change: If you're going to have industries that are going to be severely disrupted, that's going to pressure balance sheets, and lower interest rates are not going to bail out those companies. So there are industries that will be ripe for liability management. That is one issue.

Paul Taubman: The second is you're just dealing with a sheer quantum of debt, which is greater today than it was in prior cycles. So if you apply the same percentage of companies that are likely to get caught up and need balance sheet repair, it's the same constant percentage multiplied against a much bigger debt stack that would suggest greater restructuring activity. And then I think the third is in a world where there have been relatively few governors on how borrowers can conduct themselves because of stripped down covenant packages and the like, the opportunity to more creatively figure out how to restructure or recapitalize balance sheet, there's more options available.

Paul Jeffrey Taubman: Second, you're just dealing with a sheer quantum of debt, which is greater today than it was in prior cycles. So if you apply the same percentage of companies that are likely to get caught up and need balance sheet repair, it's the same constant percentage multiplied against a much bigger debt stack.

Speaker Change: The second is, you're just dealing with a sheer quantum.

Speaker Change: of debt, which is greater today than it was in prior cycles. So if you apply the same percentage

Speaker Change: of companies that are likely to get caught up and need balance sheet repair, it's the same constant percentage multiplied against a much bigger, you know, debt stack that would suggest, you know, greater restructuring activity.

Paul Jeffrey Taubman: That would suggest greater restructuring activity. And then I think the third is, in a world where there have been relatively few rules on how borrowers can conduct themselves because of, you know, stripped down covenant packages and the like, the opportunity to more creatively figure out how to restructure or recapitalize a balance sheet, there are more options available. So to me, those are the secular tailwinds, which suggest elevated activity for a considerable period of time.

Speaker Change: And then I think the third is, in a world where there have been relatively few governors on how borrowers can conduct themselves because of

Speaker Change: you know, stripped down covenant packages and the like, the opportunity to more creatively figure out how to restructure or recapitalize a balance sheet, there's more options available. So to me, those are the secular

Paul Taubman: So, to me, those are the secular tailwinds which suggest elevated activity for a considerable period of time. Now, what may be a headwind to that business is if rates come down precipitously, that may just mean that the capital markets may be so open and inviting that a lot of those companies will be able to find other ways to model through. So I don't know exactly where it's going, but I certainly see a reasonable probability that you can have a more active transaction marketplace and you can have a more active liability management marketplace. Yeah, that's okay.

Speaker Change: The Secular Tailwinds, which suggest elevated activity for a considerable period of time. Now, what may be a headwind to that business is if rates come down precipitously,

Paul Jeffrey Taubman: Now, what may be a headwind to that business is if rates come down precipitously. That may just mean that the capital markets may be so open and inviting that a lot of those companies will be able to find other ways to muddle through. So I don't know exactly where this is going, but I certainly see a reasonable probability that you could have a more active transaction marketplace, and you could have a more active liability management marketplace.

Speaker Change: That may just mean that the capital markets may be so open and inviting that a lot of those companies

Speaker Change: We'll be able to find other ways to...

Speaker Change: to muddle through. So I don't know exactly where it's going, but I certainly see a reasonable probability that you could have a more active transaction marketplace and you could have a more active liability management marketplace.

Devin Patrick Ryan: Got it. Okay. Well, I really appreciate the perspective, and I will hop back in the queue, but thank you.

Devin Ryan: Well, I really appreciate the perspective, and I will hop in the back in the tube. Thank you. Thank you, David.

James Yarrow: Thank you. We'll pick our next question from James Yarrow with Goldman Sachs. Please go ahead. Good morning, and thanks for taking my questions. Paul, maybe just starting with the M&A side of the business. Could you just touch on the dialogues that you're having with sponsors? I think we've heard from some of your peers that those are improving, but you know, how are you seeing those dialogues relative to the beginning of the year? Let's say, over what time period would you expect those two fully normalized, and do we need rate cuts for a full normalization of activity among those clients?

Operator: Thank you. We'll take our next question from James Yaro of Goldman Sachs. Please go ahead.

Speaker Change: Thank you. We'll take our next question from James Yaro with Goldman Sachs. Please go ahead.

James Edwin Yaro: Good morning, and thanks for taking my questions. Paul, maybe starting with the M&A side of the business, could you just touch on the dialogues that you're having with sponsors? I think we've heard from some of your peers that these are improving, but how are you seeing those conversations relative to the beginning of the year, let's say? Over what time period would you expect those to fully normalize, and do we need rate cuts for a full normalization of activity among those clients?

Paul Jeffrey Taubman: I think the answer, let's start at the back end. I think the answer is yes on the back end. I think you do need rate cuts for full normalization. So you can just look at the data. The data shows a quite sluggish, you know, sponsor activity level in Q1. It was stronger in Q2, and it happened to be particularly active in the month of July. Those are just the facts.

James Edwin Yaro: Good morning and thanks for taking my questions. Paul, maybe just starting with the M&A side of the business.

James Edwin Yaro: Could you just touch on the dialogues that you're having with sponsors? I think we've heard from some of your peers that those are improving, but how are you seeing those dialogues?

Speaker Change: Relative to the beginning of the year, let's say, over what time period would you expect those to fully normalize? And do we need rate cuts for a full normalization of activity among those clients?

Paul Taubman: I think the answer is yes on the back end. I think you do need rate cuts for full normalization. So you can just look at the data. The data shows a quite sluggish sponsor activity level in Q1. It was stronger in Q2, and it happened to be particularly active in the month of July. So those are just the facts. The facts are you see more sponsor activity as the year has progressed. I think the more interesting question is for attractive assets there are multiple sponsor bids and sponsors do have capital that they need to put out.

Speaker Change: I think the answer, we'll start at the back. I think the answer is yes on the back end. I think you do need rate cuts for full normalization. So you can just look at the data. The data shows

Speaker Change: A quite sluggish sponsor activity level in Q1, it was stronger in Q2, and it happened to be particularly active in the month of July .

Paul Jeffrey Taubman: The facts are that you see more sponsored activity as the year progressed. I think the more interesting question is, for attractive assets, there are multiple sponsor bids, and sponsors do have capital that they need to put out. And when there are attractive assets out there, you're certainly seeing robust competition because when those highly sought-after assets are put to market, you have an awful lot of dry powder.

Speaker Change: Those are just the facts. The facts are you've seen more sponsored activity as the year has progressed. I think the more interesting question is...

Speaker Change: For attractive assets, there are multiple sponsor bids, and sponsors do have capital that they need to put out, and when there are attractive assets out there, you're certainly seeing, you know, robust competition, because when those

Paul Taubman: And when there are attractive assets out there, you're certainly seeing robust competition because when those highly sought after assets are put to market, you have an awful lot of drive out of clear access to financing, and you're seeing transactions. And we've never suggested that the private equity marketplace would shut down. So that part of it remains robust. The question is for what I would call second tier assets or assets that may have more compromised, you know, outlooks where I think in a lower interest rate environment, there was probably more interest in those assets. I think that appears to us to still be disciplined buying interest, and that has probably been a governor.

Speaker Change: highly sought after assets are put to market, you have an awful lot of dry powder.

Paul Jeffrey Taubman: Transcripts provided by Transcription Outsourcing, LLC. The question is for what I would call second-tier assets or assets that may have more compromised outlooks, where I think in a lower interest rate environment, there would probably be more interest in those assets. I think that appears to us to still be disciplined buying interest, and that has probably been a governor. I also think, particularly in European markets and the like, you have a lot of mid-cap companies that continue to trade significantly below their true normalized value, and increasingly, the sponsor community is looking at those as very attractive take-private opportunities, and they have been active.

Speaker Change: Clear access to financing and you're seeing transactions. And we've never suggested that the private equity marketplace would shut down. So that part of it remains robust.

Speaker Change: The question is for what I would call second-tier assets.

Speaker Change: or assets that may have more compromised, you know, outlooks.

Speaker Change: Where I think in a in a lower interest rate environment there was probably more interest in those assets I think that

Speaker Change: It appears to us to still be disciplined buying interest, and that has probably...

Paul Taubman: I also think in, you know, particularly in European markets and the like you have a lot of mid cap companies that continue to trade significantly below their true normalize value. And increasingly, sponsor community is looking at those is very attractive take private opportunities and they have been been active. So we see a steady increase in sponsor activity. But ultimately, I think when rates, you know, come down, I think a bunch of those companies that still are perhaps not able to achieve sale prices that will return attractive multiples of invested capital. Or I or ours, there's a bias to hold on to those a little bit longer.

Speaker Change: been a governor. I also think in, you know, particularly in European markets and the like, you have a lot of mid-cap companies that continue to trade.

Speaker Change: significantly below their true normalized value. And increasingly, the sponsored community is looking at those as very attractive. Take private opportunities.

Paul Jeffrey Taubman: So we see a steady increase in sponsor activity, but ultimately, I think when rates, you know, come down, I think a bunch of those companies that are still perhaps not able to achieve sale prices that will return attractive multiples of invested capital or IRRs, there's a bias to hold on to those a little bit longer. And then once that shifts, then I think you see a step function in sponsor activity.

Speaker Change: and they have been been active. So we see a steady increase in sponsor activity, but ultimately I think when rates, you know, come down

Speaker Change: I think a bunch of those companies that still

Speaker Change: are perhaps not able to achieve sale prices that will return attractive multiples of invested capital or IRRs. There's a bias to hold on to those.

Paul Taubman: And then once, once that shifts, then I think you see a step function and sponsor activity.

Speaker Change: And then once that shifts, then I think you see a step function and sponsor activity.

James Yarrow: Excellent. That's very clear. Maybe just on the secondary business, could you give us a little bit of color on the contributions that that had to advise the results. This quarter and your expectations around sustainability of the robust growth that we've seen across, I think, the industry in this business in recent quarters. Well, I think the contributions, you know, to our quarter were quite broad-based. There was really no one part of the business that dominated that we saw with our private equity fundraising. We saw it in our Private Capital Solutions. We saw it in strategic advisory, and our liability management, restructuring business held up very well.

James Edwin Yaro: Excellent, that's very clear. Maybe just on the secondaries business, could you give us a little bit of color on the contribution that that had to the results this quarter and your expectations around the sustainability of the robust growth that we've seen across, I think, the industry in this business in recent quarters?

Speaker Change: Excellent, that's very clear.

Speaker Change: Maybe just on the secondaries business, could you give us a little bit of color on the contribution that that had to advisory results this quarter, and your expectations around the sustainability of the robust growth that we've seen across, I think, the industry in this business in recent quarters?

Paul Jeffrey Taubman: Well, I think the contributions, you know, to our quarter were quite broad-based. There was really no one part of the business that dominated it.

Speaker Change: Well, I think the contributions, you know, to our quarter were quite broad-based. There was really no one part of the business.

Paul Jeffrey Taubman: We saw it with our private equity fundraising. We saw it in our private capital solutions. We saw it in strategic advisory, and our liability management and restructuring business held up very well. We've always pointed to our private capital solutions business as a very significant growth opportunity. It's a leading practice, but I think there's still a lot more that we can do to take that business to yet another level. And some of that is reflected in the year-to-date results.

Speaker Change: that dominated that. We saw it...

Speaker Change: With our private equity fundraising, we saw it in our private capital solutions.

Speaker Change: We saw it in strategic advisory.

Speaker Change: And our liability management restructuring business held up very well. We've always pointed...

Paul Taubman: We've always pointed to our private capital solutions business as a very significant growth opportunity. It's a leading practice, but I think there's still a lot more that we can do to take that business to yet another level. And some of that is reflected in the year-to-date results. and some of that also is very clearly an increased demand on the part of GPs for monetization opportunities when they have assets that for a variety of reasons they'd rather continue to operate, but there's an opportunity to create choice and there's an opportunity to create liquidity for selected GPs.

Speaker Change: to our private capital solutions business as a very significant growth opportunity. It's a leading practice, but I think there's still a lot more that we can do to take that business to yet another level, and some of that is reflected in the year-to-date results.

Paul Jeffrey Taubman: And some of that also is very clearly an increased demand on the part of GPs for monetization opportunities when they have assets that, for a variety of reasons, they'd rather continue to operate. But there's an opportunity to create choice, and there's an opportunity to create liquidity for selected GPs, and, sorry, for selected LPs.

Speaker Change: And some of that also is very clearly an increased demand on the part of GPs for monetization opportunities.

Speaker Change: When they have assets that, for a variety of reasons, they'd rather continue to operate, but there's an opportunity to create choice and there's an opportunity to create liquidity for selected GPs. I'm sorry, for selected LPs.

Paul Taubman: I'm sorry for selected LPs.

James Yarrow: Next one. Thanks for the color, Paul.

James Edwin Yaro: Excellent. Thanks for the color, Paul.

Paul Taubman: Thank you.

Speaker Change: Excellent. Thanks for the color, Paul.

Brennan Hawken: And as a reminder again, that is Star One for your questions. We'll take our next question from Brennan Hawken with UBS.

Operator: And as a reminder, again, that is star number one for your questions. We'll take our next question from Vernon Hawken with UBS. Please go ahead.

Paul: Thank you.

Speaker Change: And as a reminder, again, that is star one for your questions.

Paul Taubman: Please go ahead. Good morning. Thanks for taking my questions. I'm curious to talk to you, Paul. So curious to get your perspectives. We just recently got a default and the beginning of a significant restructuring in direct lending via portal sites. So, not sure whether or not your bankers are directly related, or even if you'd comment. But as we see this emerge more as just generally like an indication for that market, you know, what do you think is the important learning from that experience? And how does that inform your expectations for restructuring?

Speaker Change: We'll take our next question from Vernon Hawken with UBS. Please go ahead.

Brennan Hawken: Morning. Thanks for taking my questions. I'm curious. Good to talk to you, Paul. I'm so curious to get your perspectives. We just recently had a default and the beginning of a significant restructuring in direct lending, you know, via portal sites. So not sure whether or not you and your bankers are directly related or even if you'd comment. But, you know, as we see this emerge more as just a generally like an indication for that market, you know, what do you think is the important learning from that experience and how does that inform your expectations for restructuring?

Vernon Hawkin: Good morning. Thanks for taking my questions. I'm curious.

Brennan Hawken: Good to talk to you, Paul. So, curious to get your perspectives. We just recently got a default and the beginning of a significant restructuring in direct lending.

Speaker Change: via Pluralsight. So not sure whether or not you, your bankers are directly related or even if you'd comment, but as we see this emerge more as just generally like an indication for that market,

Paul: do you think is the important learning from that experience and how does that inform your expectations for restructuring?

Paul Jeffrey Taubman: I'd rather keep my comments more general and not talk about specific situations, but I think it begins to puncture this fear, that somehow more direct lending, more private lending, is an opportunity to bypass the ultimate need for active liability management. Companies succeed and companies fail whether they're financed in the public markets or the private markets, [inaudible] Need that's being met by private capital, but the idea that somehow a bunch of lenders can, amongst themselves, just figure out how to restructure commitments that have been made with borrowers without there being various stakeholders who have different perspectives and need expert advice and capabilities we just don't buy into. So no one ever enjoys seeing particular companies.

Paul Taubman: I'd rather keep my comments more general and not talk about specific situations, but I think it begins to puncture this fear that somehow more direct lending, more private lending is an opportunity to bypass the ultimate need for active liability management. And the reality is that companies succeed and companies fail whether they're financed in the public markets or the private markets. And ultimately, that's sort of the way of the world. And I do think that there's a real need that's being met by private capital. But the idea that somehow a bunch of lenders can, amongst themselves, just figure out how to restructure commitments that have been made with borrowers without there being various stakeholders who have different perspectives and need expert advice and capabilities.

Speaker Change: I'd rather keep my comments more general and not talk about specific situations, but I think

Speaker Change: It begins to puncture this fear that somehow more direct lending, more private lending

Speaker Change: is an opportunity to bypass the ultimate need for active liability management.

Speaker Change: And the reality is that...

Speaker Change: Companies succeed and companies fail, whether they're financed in the public markets or the private markets, and ultimately,

Speaker Change: of the way of the world and I do think that there's a real

Speaker Change: need that's being met by private capital, but the idea that somehow a bunch of lenders can, you know, amongst themselves

Speaker Change: Just figure out how to restructure.

Speaker Change: commitments that have been made with borrowers without there being various stakeholders who have different perspectives and need expert advice and capabilities we just don't don't buy into so

Paul Taubman: We just don't buy into, so no one ever enjoys seeing particular companies in distress. But the reality is we have unique capabilities that can help create more value out of those missteps than our competitors. And we're going to continue to aggressively market our services just to make sure that we can be helpful in as many situations as possible. And we don't view the private credit market as somehow close to a helpful strategic and financial. Reyes. Okay, great. Thanks. That's, that's all very fair.

Speaker Change: No one ever, you know, enjoys seeing, you know, particular companies

Speaker Change: and distressed, but the reality is we have unique capabilities that can help create more value out of those.

Speaker Change: missteps than our competitors, and we're going to continue to.

Speaker Change: aggressively market our services just to make sure that we can be helpful in as many situations as possible and we don't view the private credit market as somehow closed to helpful strategic and financial advice.

Speaker Change: Okay, great. Thanks. That's all very fair.

Paul Taubman: Over time, Paul, you've provided color on the success that you've had in integrating PJT Came Review into your advisory practice, which, you know, I think is really quite differentiated. Can you talk about how that business has grown over time and how integrating those capabilities, you know, has contributed to the growth prospects for strategic advisory and what you expect in the medium term? Yeah, it's a, it's a great question. And, you know, one of the reasons we don't talk about it on these calls as much is because it is so integrated into what we do. It's really the essence of what we do.

Speaker Change: Over time, Paul, you've provided color on the success that you've had in integrating PJT Camberview.

Speaker Change: into your advisory practice, which, you know, I think is really quite differentiated.

Speaker Change: Can you talk about how that business has grown over time and how integrating those capabilities has contributed to the growth prospects for strategic advisory and what you expect in the medium term?

Paul Jeffrey Taubman: Yeah, it's a great question, and one of the reasons we don't talk about it on these calls as much is that it is so integrated into what we do. It's really the essence of what we do.

Paul: Yeah, it's a great question and one of the reasons we don't talk about it on these calls as much is because it is so integrated into what we do. It's really the essence.

Paul Taubman: We, we benefit in so many different ways. One, one way is we have a very significant group of former investors who bring an investing lens to many corporate situations, and our ability to provide value-added strategic IR assistance to clients as they tell their stories, as they help companies reset, as they help new management teams, you know, articulate their vision. That is part of what we do at our core. So that's just one example of a can review capability that is now fully integrated into pretty much everything we do. And in every client conversation, we're always spending time figuring out how we can help them with their external positioning, storytelling, and how they can make sure that they're matching their vision with their communications.

Paul: of what we do, we benefit in so many different ways.

Paul Jeffrey Taubman: We benefit in so many different ways. One way is that we have a very significant group of former investors who bring an investing lens to many corporate situations. And our ability to provide value-added strategic IR assistance to clients as they tell their stories, as they help companies reset, as they help new management teams articulate their vision is part of what we do at our core. So that's just one example of a CanvaView capability that is now fully integrated into pretty much everything we do, and in every client conversation, we're always spending time figuring out how we can help them with their external positioning, storytelling, and how they can make sure that they're matching their vision with their communications.

Paul: One way is we have a very significant group of former investors.

Paul: who bring an investing lens.

Paul: to many corporate situations, and our ability to provide value-added strategic

Paul: IR assistance to clients as they tell their stories.

Paul: as they help companies reset, as they help new management teams.

Paul: articulate their vision, that is part of what we do at our core. So that's just one example of a...

Paul: CAM Review capability that is now fully integrated into pretty much everything we do. And in every client conversation, we're always spending time figuring out how we can help them.

Paul: with their external positioning.

Paul: Storytelling and how they can make sure that

Paul: there.

Paul: they're matching their vision with their communications. Then you've got the leading governance franchise. And we have a unique ability to talk to the

Paul Taubman: Then you've got a leading governance franchise, and we have a unique ability to talk to the largest shareholders of many of our clients who are passive in terms of investing, but they're quite active in terms of governance. And ultimately, when you get to contested situations, being able to have the unique window into how your larger shareholders are going to absorb information and how they're going to think about contested situations is a value that we bring that others don't bring. So being able to match that up with our leading shareholder defense practice gives us unique windows.

Paul Jeffrey Taubman: Then you've got the leading governance franchise, and we have a unique ability to talk to the largest shareholders of many of our clients, who are passive in terms of investing, but they're quite active in terms of governance. And ultimately, when you get to contested situations, being able to have a unique window into how your largest shareholders are going to absorb information and how they're going to think about contested situations is a value that we bring that others don't bring.

Paul: These are the two largest share owners of many of our clients who are passive in terms of investing, but they're quite active in terms of governance.

Paul: And ultimately, when you get to contested situations...

Paul: being able to have a unique window into how your largest shareholders are going to absorb information.

Paul: and how they're going to think about contested situations is a value that we bring that others don't bring, so being able to match that up with our leading.

Paul Jeffrey Taubman: And being able to match that up with our leading shareholder defense practice gives us unique windows. And then we have the basic footprint of all of the boardrooms and governance discussions that our Canberra View colleagues are having that give us windows and opportunities to better tell the PJT story and to introduce banking teams to round out the overall service offering. So it's become quite seamless, and we've benefited greatly. The headcount in that group has grown appreciably, and their commercial contribution to our franchise has grown significantly. And as I look back on that acquisition, that combination couldn't be prouder of what we've together achieved. So it's an integral part of what we do.

Paul: Shareholder Defense Practice gives us unique windows, and then we have the basic footprint of all of the boardrooms.

Paul Taubman: And then we have the basic footprint of all of the wardrooms and governance discussions that our can review colleagues are having that give us windows and opportunities to better tell the PJT story and to introduce banking teams to round out the overall service offering. So it's become quite seamless. We've benefited greatly. The headcam in that group has grown appreciably. Their commercial contribution to our franchise has grown significantly. And as I look back on that acquisition, that combination couldn't be prouder of what we've together achieved. So it's an integral part of what we're doing.

Paul: and governance discussions that our Canberra VIEW colleagues are having.

Paul: that give us windows and opportunities to...

Paul: better tell the PJT story.

Paul: and to introduce banking teams to round out the overall service offering. So it's become quite seamless.

Paul: We've benefited greatly. The headcount in that group has grown appreciably. Their commercial contribution to our franchise has grown significantly.

Paul: And as I look back on that acquisition, that combination, couldn't be prouder of what we've together achieved. So it's an integral part of what we're doing.

Paul Taubman: Great. Thanks for that color, Paul. Thank you.

Brennan Hawken: Great. Thanks for that, Colorball.

Paul: Great. Thanks for that cover, Paul.

Operator: Thank you. We'll take our next question from Brendan O'Brien with Wolf Research. Please go ahead.

Brennan O'Brien: I'll take our next question from Brennan O'Brien with Wolf Research. Please go ahead. Good morning. Thanks for taking my question.

Paul: Thank you.

Speaker Change: Thank you. We'll take our next question from Brendan O'Brien with Wolf Research. Please go ahead.

Brendan O'brien: Good morning. Thanks for taking my question. I guess to start, you know, Paul, you mentioned interest rate cuts as being a potential driver of a step function increase in activity post-election. However, the election could also bring about a change in administration. You know, given your focus on larger cap deals, I just want to get a sense as to how more accommodative FTC rules could impact activity levels in your view. For example, how much has the current more restrictive regime maybe impeded activity of late?

Paul Taubman: I guess to start, you know, Paul, you mentioned interest rate cuts as being a potential driver of a step function increase in activity post-election. However, the election could also bring in a change in administration; you know, give in your focus on larger tap deals. I just wanted to get a sense of how more accommodated FTC could impact that activity levels in your view. You know, how much has the current, more restrictive regime maybe impeded activity of late, and, you know, any color you could provide there if you're helpful. Sure. Look, I've said for a long time that I think this election is going to be extraordinarily volatile.

Brendan O'brien: Good morning. Thanks for taking my question. I guess to start, you know, Paul, you mentioned interest rate cuts as being a potential driver of a step function increase in activity post-election.

Speaker Change: However, the election could also bring in a change in administration. You know, given your focus on larger cap deals, I just wanted to get a sense as to how more accommodative FTC could impact activity levels in your view. You know, how much has the current more restrictive regime maybe

Paul Jeffrey Taubman: And, you know, any color you could provide would be helpful.

Speaker Change: impeded activity of late and, you know, any color you could provide there would be helpful.

Paul Jeffrey Taubman: Sure. Look, I've said for a long time that I think this election is going to be extraordinarily volatile. I've said repeatedly that I didn't think investors fully appreciated the volatility that would come with this election. I think we've seen some of it, and I suspect, as we turn the page to Labor Day and we have the sprint through Election Day and beyond, there's probably a lot of volatility still to come.

Speaker Change: Sure. Look, I've said for a long time that I think this election is going to be extraordinarily volatile.

Paul Taubman: I've said repeatedly that I didn't think investors fully appreciated the volatility that would come with this election. I think we've seen some of it, and I suspect that as we turn the page to Labor Day and we have the sprint through Election Day and beyond, there's probably a lot of volatility still to come. But I think once you get past that and there is clarity and there is an understanding as to the nature of the next administration, I think that that is going to be a positive regardless of which way this election turns out for deal making.

Speaker Change: I've said repeatedly that I didn't think investors fully appreciated the volatility that would come with this election. I think we've seen some of it, and I suspect

Speaker Change: That as we turn the page to Labor Day and we have the sprint through Election Day and beyond, there's probably a lot of volatility still to come. But I think once you get past that and there is clarity and there is an understanding as to the nature of the next administration,

Paul Jeffrey Taubman: But I think once you get past that, and there is clarity, and there is an understanding as to the nature of the next administration, I think that is going to be positive, regardless of which way this election turns out for dealmaking. I think there are lots of reasons for that.

Speaker Change: I think that that is going to be a positive, regardless of which way this election turns out for deal making. I think there are lots of reasons for it. I think in some respects it may be a change in...

Paul Taubman: I think there are lots of reasons for it. I think in some respects, it may be a change in antitrust and competitive posture. In others, it may be simply that there is clarity on the world, and ultimately companies will realize that there's no additional benefit of waiting, and they're going to have to judge strategic transactions based on what's there. And then, whether it's a second term of this Biden-Harris administration or the first term of a Harris administration, it's likely to have a different composition as it relates to competitive posture and the like. And I think once you just get past all of that, my strong sense is that this will be positive for deal making environment.

Paul Jeffrey Taubman: I think in some respects, it may be a change in antitrust and competitive posture. In others, it may be simply that there is clarity in the world, and ultimately, companies will realize that there's no additional benefit of waiting, and they're going to have to judge strategic transactions based on what's there. And then, whether it's a second term of this Biden-Harris administration or the first term of a Harris administration, it's likely to have a different composition as it relates to competitive posture and the like.

Speaker Change: in Antitrust and Competitive Posture. In others, it may be...

Speaker Change: Simply that there is clarity on the world and ultimately companies will Realize that there's no additional benefit of waiting and they're going to have to judge strategic transactions based on what's there and then whether it's a second

Speaker Change: term of

Speaker Change: This Biden-Harris administration or the first term of a Harris administration, it's likely to have a different composition as it relates to competitive posture and the like, and I think once you just get past all of that,

Paul Jeffrey Taubman: And I think once you just get past all of that, my strong sense is that this will be positive for a dealmaking environment. The TBD is how incrementally positive. But as I go through all of the permutations and the like, it's hard to come up with a scenario where it would be less inviting than it currently is. So that's one of the reasons why I think once we get past the elections, there will be more clarity and, likely, more strategic activity.

Speaker Change: My strong sense is that this will be positive for

Paul Taubman: The TBD is how incrementally positive, but as I go through all of the permutations and the like, it's hard to come up with a scenario where it would be less inviting than it currently is. So that's one of the reasons why I think once we get past the elections, I think there'll be more clarity and likely more strategic activity. And I think sponsors, well, they're starting to put their toes in the water, are probably going to be more forward leaning once there's the travel down in terms of rates and the exit multiples more closely match the entry multiples.

Speaker Change: For a deal-making environment the the TBD is how incrementally positive

Speaker Change: But as I go through all of the permutations and the like, it's hard to come up with a scenario where it would be less...

Speaker Change: inviting than it currently is. So that's one of the reasons why I think once we get past the elections

Speaker Change: I think there will be more clarity and likely more strategic

Paul Jeffrey Taubman: And I think sponsors, while they're starting to put their toes in the water, are probably going to be more forward-leaning once the travel costs are down in terms of rates, and the exit multiples more closely match the entry multiples. And I think when you have the two of them working in combination... You have that coupled with a lot of pent-up demand in both the alternative asset industry and with corporates for a step function increase. It's the potential, not a guarantee, but there is the potential for a step function.

Speaker Change: activity.

Speaker Change: And I think sponsors, while they're starting to put their toes in the water, are probably going to be more forward-leaning once there's a, you know,

Speaker Change: The travel down in terms of rates and the exit multiples more closely match the entry multiples. And I think when you have the two of them working in combination...

Brennan O'Brien: And I think when you have the two of them working in combination, you have that coupled with a lot of pent-up demand in both the alternative asset industry and with corporates for a step function increase. It's the potential, not a guarantee, but there is the potential for a step function.

Speaker Change: You have that coupled with a lot of pent-up demand in both the alternative asset industry and with corporates for a step function increase. It's the potential, not a guarantee, but there is the potential for a step function increase.

Brendan O'brien: That's a great color. Thanks, Paul. And I guess for my follow-up, I just wanted to touch on the comp ratio. You know, year-to-date results have been quite impressive, and it seems like there's a lot of momentum across your platform at the moment. However, you kept the comp ratio at 69.5%. Want to get a sense as to whether we should be viewing this as an indication that maybe you won't be experiencing the same seasonality and back half revenues relative to the first half, or is this simply some conservatism or a reflection of the continued elevated pace of recruiting? Look.

Paul Taubman: I guess for my follow-up, I just wanted to touch on the compression. You know, year-to-date results have been quite impressive, and it seems like there's a lot of momentum across your platform at the moment. However, you kept the compression at 69 to half percent. Let's want to get a sense; it's whether we should be viewing this as an indication that maybe you won't be experiencing the same seasonality and back cap revenue is rather relative to first half, or is this simply some conservatism or reflection of it continued elevated pace of recruiting. Look, what goes into that ratio is you're making estimates about full-year performance, you're making estimates about full-year recruiting, you're making estimates of what the competitive environment is, and at this point in the year, that remains our best estimate for the year.

Speaker Change: That's a great color. Thanks, Paul. And I guess for my follow-up, I just wanted to touch on the comp ratio. You know, year-to-date results have been quite impressive and it seems like there's a lot of momentum across your platform at the moment. However, you kept the comp ratio at 69.5%.

Speaker Change: I just wanted to get a sense as to whether we should be viewing this as an indication that maybe you won't be experiencing the same seasonality in back half revenues relative to first half.

Speaker Change: Or is this simply some conservatism or reflection of the continued elevated pace of recruiting?

Paul Jeffrey Taubman: Look, what goes into that ratio is you're making estimates about full-year performance and recruiting. You're making estimates of what the competitive environment is, and at this point in the year, that remains our best estimate for the year. What I have also repeatedly said is that to get real comp leverage, you need to see strategic advisory revenues going back to 2020. [inaudible] equal or exceed headcount growth.

Speaker Change: Hello.

Speaker Change: What goes into that ratio is you're making estimates about full year performance.

Speaker Change: You're making estimates about full-year recruiting. You're making estimates of what the competitive environment is.

Speaker Change: And at this point in the year, that remains our best estimate for the year. What I have also said repeatedly is that to get real comp leverage,

Paul Taubman: What I have also said repeatedly is that to get real comp leverage, you need to see strategic advisory revenues going back to 2020 to, whenever, you know, equal or exceed headcount growth. And given the significant contraction, you know, in global M&A activity in 22 and 23, and what is still a modest recovery in 24, I've always viewed that as much more of a 25 and beyond phenomenon. And we want to think about us; we're consistent. That's been our view. Great, thank you for taking my questions. Absolutely.

Speaker Change: You need to see strategic advisory revenues going back to 2020 to...

Paul Jeffrey Taubman: And given the significant contraction in global M&A activity in 22 and 23, and what is still a modest recovery in 24, I've always viewed that as much more of a 25 and beyond phenomenon. And one thing about us, we're consistent. That's been our.

Speaker Change: whenever.

Speaker Change: equal or exceed headcount growth. And given the significant contraction in global M&A activity in

Speaker Change: 22 and 23, and what is still a modest recovery in 24, I've always viewed that as much more of a 25 and beyond phenomenon.

Speaker Change: And we, one thing about us, we're consistent. That's been our view.

Brendan O'brien: Great Thank you for taking my questions.

Speaker Change: Great. Thank you for taking my questions. Absolutely.

Operator: Thank you, and that concludes our question-and-answer period.

Paul Jeffrey Taubman: Thank you, and that concludes our question and answer period. I would now like to turn the call back over to Mr. Taubman for any closing remarks. I just want to thank everyone for participating today and for their interest in our company.

Paul Taubman: I would now like to turn the call back over to Mr. Tauman for any closing remarks. This one, thank you everyone for participating today for your interest in our company, and we look forward to speaking with you when we have the opportunity to report our third quarter results.

Speaker Change: Thank you, and that concludes our question and answer period. I would now like to turn the call back over to Mr. Taubman for any closing remarks.

Paul Jeffrey Taubman: I just want to thank everyone for participating today, for your interest in our company, and we look forward to speaking with you when we have the opportunity to report our third quarter results. So, everyone, have a wonderful day. Go to Beadaholique.com for all of your beading supply needs!

Paul Jeffrey Taubman: I just want to thank everyone for participating today, for your interest in our company. And we look forward to speaking with you when we have the opportunity to report our third quarter results. So everyone have a wonderful day.

Operator: So everyone has a wonderful day.

Operator: This concludes your program; you may disconnect.

Operator: This concludes your program. You may disconnect.

Speaker Change: ♪♪ ♪♪